GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:
Can the U.S. government prosecute an individual for Foreign Corrupt Practices Act (FCPA) violations if that individual is not a U.S. citizen or resident, and committed no unlawful act in U.S. territory? An important case posing that question is now before a U.S. appeals court. The decision may have important implications on the territorial reach of the FCPA.
The facts and relevant statutory provisions are straightforward, although the analysis is not. The defendant, Lawrence Hoskins, is a British national who at all relevant times was an officer of a British subsidiary of French manufacturing giant Alstom. Alstom and several of its subsidiaries were investigated by the US Department of Justice for alleged illicit payments in Indonesia, and ultimately reached a global corporate settlement that included several corporate guilty pleas and Deferred Prosecution Agreements, pursuant to which the corporate entities paid US fines of over US$750 million. The DOJ also pursued several individuals, including Mr. Hoskins, who was ultimately arrested when he arrived in the United States on vacation. His attorneys moved to dismiss the indictment on the ground that the US prosecutor lacked power to prosecute him. After energetic procedural activity by both sides, the District Court granted his motion in significant part. Unusually, the prosecutor appealed, and oral argument was heard on March 2, 2017.
The FCPA identifies two categories of individuals subject to its terms: (1) “domestic concerns,” which in the case of individuals means either a citizen or resident of the United States, or an agent of a corporation incorporated or with its principal place of doing business in the United States; and (2) individuals who commit acts “in the territory of the United States.” Those jurisdictional bases are traditional and well-accepted. Mr. Hoskins does not fall into either category: he was a UK national working for a UK subsidiary of a French company, and there is no indication that he set foot in the United States other than on vacation. A straightforward application of the statute to the facts would lead to a conclusion that Mr. Hoskins cannot be prosecuted for FCPA violations.
The DOJ argued, however, that Mr. Hoskins could be found guilty for having aided and abetted, or conspired with, individuals and corporate entities that were subject to the FCPA, even if Mr. Hoskins himself was not. That argument is hardly meritless: A federal statute, 18 U.S.C. § 2, provides that a person who “aids or abets” a principal can be found liable as a principal even without having committed the relevant crime himself. Another statute, 18 U.S.C. § 371, makes it a separately prosecutable crime to “conspire to commit an offense against the United States”; since the Supreme Court’s 1946 decision in Pinkerton, this statute has been interpreted to mean that a conspirator can be found liable not only for the conspiracy but also for the crime that was its object.
A relatively obscure but nonetheless important limitation on principles of “vicarious liability” such as aiding/abetting and conspiracy became the critical focus of the dispute in Hoskins. In Gebardi v. United States, decided in 1932, the Supreme Court held that aider/abettor and conspirator liability is inapplicable if the criminal legislation establishing the primary offense indicated “a Congressional intent not to prosecute” a class of individuals to which the defendant belongs. This so-called “Gebardi principle” has been applied in a variety of circumstances, with sometimes inconsistent results. In Hoskins, the trial judge concluded that, in the specific context of the FCPA, the Gebardi principle precluded the DOJ’s vicarious liability theories. The judge reasoned that in adopting (and amending) the FCPA, Congress showed that it was well aware of the international implications of the Act’s enforcement, and drew a careful line between US nationals (who could be prosecuted no matter where they committed an offense) and non-nationals, who could be prosecuted only for acts they committed in the United States. This distinction, she concluded, was not inadvertent, but reflected Congress’s awareness that prosecution of other country’s nationals other than for acts committed in the US could raise diplomatic tensions.
Although the trial court and the parties principally focused on Gebardi, two international considerations support the trial judge’s conclusion:
- First, in the specific context of the FCPA, the DOJ’s vicarious liability theories would expand the law’s territorial reach, and deserve analysis under currently evolving doctrines of extraterritoriality. As recently invigorated by the Supreme Court in its 2010 decision Morrison v. Nat’l Australian Bank Ltd., the relevant issue is not what Congress could do, but what it actually did — that is, did Congress intend for its legislation to apply to conduct outside the territory of the United States, and if so, how? In Morrison, the Court stated bluntly that “when a statute gives no clear indication of an extraterritorial application, it has none,” and noted further that even if a statute “provides for some extraterritorial application, the presumption against territoriality operates to limit that provision to its terms.” By focusing on congressional intent rather than power, Morrison and its progeny are very similar to, and certainly not inconsistent with, Gebardi principles, which also focus on what Congress intended. Curiously, the Morrison extraterritoriality analysis figured relatively little in the Hoskins appeal: it was not even mentioned in the Government’s principal brief, and Mr. Hoskins himself did not emphasize it. The Morrison extraterritoriality analysis was, however, energetically invoked in an amicus brief filed by The New York Council of Defense Lawyers; unusually, an attorney representing the Council participated in oral argument, and was questioned on this issue.
- Second, and very consistently with the Morrison issue, the DOJ’s broad theory of vicarious FCPA liability creates tensions with Article 4.3 of the OECD Convention on Combating Bribery for Foreign Public Officials in International Business Transactions. While not necessarily exclusive, the OECD Convention recognizes only two bases for a signatory country’s power to prosecute overseas bribery: when the illegal acts are “committed in whole or in part” in the territory of the prosecuting country, or when a country “prosecute[s] its nationals for offenses committed abroad.” As already noted, both of these two bases for jurisdiction, while clearly fundamental to the FCPA itself, are absent in Hoskins. Moreover, the OECD Convention goes further, noting that in the easily foreseeable situation where “more than one [signatory country] has jurisdiction over an alleged offense,” the countries should “consult with a view to determining the most appropriate jurisdiction for prosecution.” As I have noted, while not creating a “double jeopardy” or equivalent right against multiple prosecutions, this provision clearly contemplates that only one country should prosecute a given defendant, and that prosecutors in other countries should defer to prosecutors in “the most appropriate jurisdiction.” The 1998 amendments to the FCPA were clearly intended to bring the Act into compliance with the OECD Convention, and just as clearly adopted nationality and territory principles as the only articulated bases upon which individuals could be prosecuted; it follows that Congress was fully cognizant of the allocation of prosecutorial responsibility that the OECD Convention mandates. Hoskins would thus seem to fall squarely within the Court’s admonition in Morrison that a presumption against extraterritoriality should “limit” the applicability of a US statute “to its terms” absent a clear showing of congressional intent to the contrary. A contrary ruling would certainly come as a surprise to the 40 countries in addition to the U.S. that signed the OECD Convention — who understandably would interpret Article 4.3 to mean that non-nationals of the U.S. who commit acts only outside of it will be prosecuted by the “most appropriate” jurisdiction on the basis of nationality or territory — and could only add to the risks, already apparent, of tension between US prosecutors and their counterparts overseas, especially in Europe.